Recessions, wars, terrorist attacks, new technologies, pandemics. Black swan events are more and more frequent, rising unpredictability and harshness in Markets as well as the need for transformations. While firms always needed to match strategy with business context, the urgency to do so is now higher than ever.
Why a different approach to the strategy
What’s the best strategy for your company to rebound from the COVID19 crisis? Are you ready for the probable incoming recession? Many businesses will struggle, while some, like online Supermarkets, Gaming, eSports, Online Learning, are already experiencing a boost in revenue.
The COVID19 shock will probably leave durable changes in the way we live and work. Many firms should adapt and reinvent themselves in a growth-oriented transformation journey, but what is the right approach?
COVID19 is just the last shock reshaping our business environment. World is changing fast and the diversity and range of business environments is increasing even faster. In Your strategy needs a strategy (Reeves, Haanaes, Sinha) three BCG Consultants draw and put in context the five archetypical approaches to strategy. Here is a short and interesting Ted Talk by one of the authors, Martin Reeves.
Fact is, your specific environment requires a specific approach, and you should select and match the right approach based on your business, sector, portfolio and time. How do you do that? You start by assessing your business environment over the three dimensions of predictability (can you predict it), malleability (can you shape it) harshness (can you survive it). The three dimensions determine five quadrants, each defining a different strategic style. Then you’ll pick the right strategic style, process and transformation journey. You execute it, assess the results, and adapt. Then the cycle begin again.
Unpredictability is increasing due to the pace of technological change, impact of pandemic and cultural changes. Harshness increases as competitive conditions worsen. Malleability changes across the market/product life cycle. It is typically higher in the startup stages of new markets, then it decreases with the increase in the number of competitors and the concentration index of the sector.
Five archetypical approaches
The five approaches are:
- Classical – Be Big. In a stable and predictable environment, the classic Analyse. Plan, Execute approach to strategy works best. Chocolate Bars market is an example of this kind of environment. Brands are durable and stability is high, so firms can plan their strategy with a focus on costs, profitability and efficiency. Scale economies are typically huge and thus the imperative is Be Big. The strategic process is top-down, aiming to sustainable competitive advantage
- Adaptive – Be Fast. As the world economy has shifted from physical to digital, the pace of change in technology has increased, thus many industries are now hard to predict and to shape. Software, Finance, eCommerce, Semiconductor, Media. The change in these industries is not easily predictable, thus future can’t be planned. Fast exploration of new possibilities is central in a Vary, Selecting, Scale-up approach. The strategy is emergent rather than planned. Learning and Time to markets are crucial, supported by a development process carried on in short rapid iterations.
- Visionary – Be First. The best way to predict the future is to invent it. The process here is Find untapped opportunities, Build the company and the product, Persist in your objective
- Shaping – Be the Orchestrator. In the early stages of a market, business rules are still to be written. Firms engage other stakeholders to build a common platform, orchestrate, and evolve the ecosystem. Eco-systems are complex, adaptive systems with a number of self-organizing agents cooperating in a dynamic network.
- Renewal – Be Viable. When the going gets really tough, business can’t be sustained and a radical change is needed. In this environment, firms need to React to the tough environment, Economize to survive in the short term, and finally ensure long term Growth
What kind of problems firms face within the five strategic styles framework:
- They choose a mismatched strategy, with no coherence with the environment
- They choose the same strategy across different segments/business units
- They choose the right strategy but they don’t execute correctly
Recap – How to do it
Whatever your strategy, chances are your environment is becoming more and more complex. Strategy is thus becoming more and more an adaptive process and less a planned one. Agility at Team and Business level is becoming a core component in the transformation path of an increasing number of companies
You’ll have to pickup the right mix of strategic approaches and build the related capabilities, constantly inspecting the environment and adapting to it. Agility must be unlocked at all the right levels, sometimes mixed up with more slow, conservative command and control approaches, in an ambidextrous slow/fast combination.
Marcello Del Bono is coaching and leading Agile Teams, supporting Transformation programs. He has multi-year experience as a Product Owner, Scrum Master and Agile Coach in e-commerce, IT, Marketing and Decision Support Systems in Media, Telco, Finance, Fashion industries.
Contact him on Linkedin